In the pursuit of ever increasing profits, corporations dream up more and more sophisticated techniques to get you to buy what makes the most money for them.
Understanding the true cost of goods and services and spotting the techniques in use will even the odds and save you thousands every year.
In this blog I will highlight the corporations to avoid and how to buy the goods and services you want without getting tricked.

Thursday, October 27, 2011

Automakers are starting to confuse car buyers by making it seem like their new vehicles are cheaper than last year's models.
In recent months, a number of cars have come with much lower base MSRP prices for 2012 compared to 2011, notes USA Today.
To create the lower prices, however, companies are removing standard features.
A prime example is the 2012 Nissan Murano CrossCabriolet. Down a whopping $1,850 compared to the 2011 base model. The catch? GPS Navigation is no longer a standard feature.Chevrolet made a similar decision with the Volt, dropping the base price about a thousand dollars. To accomplish that, however, the company removed not only navigation from the standard equipment list, but also the Bose Stereo and other smaller items.
Automakers know that the vast majority of car buyers DO NOT buy the base model. In fact, it can sometimes be very difficult to even find bare-bone base models on dealer lots.
By removing standard features from the base model, car companies can advertise much lower starting prices, even though they're unrealistic for the vast majority of consumers.
Essentially, the idea is: When comparing prices between model years, be sure you're looking at equivalent equipment levels rather than just the price.

Wednesday, October 26, 2011

Almost everybody who owns a car will one day need to have some sort of brake service performed.

I have just gone through the process of contacting literally dozens of garages to get estimates ranging from the big names such as Firestone, Aamco & Les Schwab to lots of highly recommended independent mechanics. I even contacted an official dealer for an estimate.

While labor rates varied and some marked up parts more than others, there were basic similarities in how everyone worked. Your car is spec'd for ceramic brakes so we'll quote you for those. Yes we'll machine the rotors and this is the price but if you need new rotors this is the price.

Les Schwab

Which is why I am writing about Les Schwab. Les Schwab do things differently. They don't quote for brake pads, they quote for loaded calipers. While telling me verbally they would try to machine the rotors, they presented for my signature an estimate containing new rotors even though they had measurements indicating the rotors were only 25% worn. They didn't disclose the brake pad measurement nor explain the interpretation of rotor measurements that they did disclose. On the phone they quoted me for ceramic brakes but in person they advised ceramic would be $60 more.

Having noticed multiple signs of misinformation or withheld information in a process that was clearly slick and orchestrated (they greet you in the car park, a receptionist takes details, they bring the car round to the front door when you leave), and intrigued by such a different approach, I set out to understand what was going on. I thought through how they went about the sale, what information they disclosed, what they said and sometimes more tellingly, what they didn't say, and also what the underlying economics were.

The more I pieced everything together, the more I began to realize that Les Schwab runs a very unique sales approach as part of a extremely clever business model that is designed to generate excessive profit through delivering less to the customer while making the customer think they are getting more. In addition, by having a different pricing approach, direct comparability is made more difficult vs their competition.

It's very clever, in some ways one has to admire how clever it is. But the bottom line is that not only do you pay more, you get a worse result while having the wool pulled over your eyes, and that's just plain insulting to the customer.

How Les Schwab will make $700 per axle more from you

Firstly, how did I calculate they would be more expensive by $700 per axle?

Very simply, after checking my brakes and measuring my rotors, Les Schwab quoted me $425 for work they said was required. The work would be warrantied for 3 years / 25k. Based on the quality of the pads and rotors that they quoted, plus their approach of changing the rotors when not required, over 6 years / 60k, you could expect to do this service twice for a grand sum of $850 if you were to trust their advice.

In the end, I purchased my own ceramic brake pads and took them to my local mechanic for a grand total of $150 for install, cleaning, greasing and machining the existing rotors. The pads are lifetime and the rotors should last for 60k at least.

At issue here is that regardless of the status of your brakes, you will most likely be quoted exactly like I was or something very close. You will be verbally told that they will try to machine the rotors but the worst case is that they'll need replacing. You'll sign the estimate on the basis of this verbal understanding and return to find they needed to replace the rotors.

The sales process and business model that is in place dictates that approach and targeted outcome. When you go through the process, unless you are an informed customer, you won't realize that you're setting yourself up for paying $850 over 6 years vs $150. You go through a process designed to persuade you that you are getting a better result justifying the amount being charged. The $98.50 for labor includes a brake fluid flush. Wow that's cheap - the others charge $100 extra for that item alone. They put on calipers not just new pads. Great, that's better than everyone else.

But this is not the reality. If you pay $425 and receive great rotors, great calipers, great pads - in short a brake system overhaul that performs great and lasts a lifetime, AND you needed all of those elements, then it's only an average to good deal.

But you most likely don't need that and in any case you're not even getting that! You're getting basic brakes and basic rotors (probably worse than what you have), potentially not so good calipers and on top they'll be worn out in 3 years time and you'll need to have the work done again and pay $425 again.

The Caliper Con

Les Schwab do not quote for brake pads, they quote for remanufactured loaded calipers. The price quoted ($121 in my case vs $107 on Amazon), does not seem expensive, especially when they quote it together with Labor of $98.50 which includes a brake fluid flush.

But the truth behind the calipers is as follows;

It is highly unlikely that you need calipers. I know I didn't.

The brake pads are not ceramic and won't last. My OEM pads are ceramic. Ceramic were $60 extra.

Les Schwab's out of pocket for the calipers is probably ~$40 as they make money on the good quality original calipers discarded from your vehicle which are then remanufactured

The labor charge of $98.50 is effectively nearer $180 when you factor in the profit on the calipers

So by upselling to calipers, you end up with inferior pads and they end up actually charging a very high labor rate.

The Rotor Racket

Les Schwab have a huge incentive to sell you rotors.

Machining rotors costs from $20 to $50 a pair and uses labor time, training, machine wear and tear. The new rotors they quoted me were $179 for two. The cost on Amazon? $64 for two! Which puts them in the realm of cheaper rotors. That's at least $115 profit before any profit on recycling used rotors which in my case were still usable! They also take minimal time to install.

So by upselling you to rotors, you end up paying significantly over the odds, giving up potentially better rotors, and they boost their labor rate again!

Summary

Overall I estimate that after the true cost of parts, Schwab would make over $300 for an hour of their labor while sticking you with basic brakes and basic rotors.

However, when they present this to you, you are being sold on receiving calipers worth $120 and new rotors worth $180 with only a small seemingly reasonable charge for their labor which also includes a brake fluid flush. On top of this you will receive a 3 year / 25k warranty (that Les Schwab have cleverly moved the risk of to the rotor and caliper manufacturer rather then themselves because they are not machining rotors or installing pads - they are just assembling!)

Interestingly, it is being presented as $300 parts and $100 labor, but it is in fact $100 parts and $300 labor!

If you knew that, if it were presented that way, would you pay it? No way!

It is incredibly clever and I am all for getting rewarded for being clever, but as I said, in this case you are not getting a superior result for your $425, you're getting pretty much the most basic parts that will stand up to a 3 year / 25k warranty whereas so many pads and rotors now come with lifetime warranties

If you didn't know better, you'd be happy. And with the slick sales and service process, many customers are blissfully unaware of what they've done.

The Alternatives

I purchased Wagner Thermoquiet brakes which match original equipment specifications. For my car, this meant they were ceramic. Their usual price is $30 to $40. I found them for $29 while a $15 rebate was running. So this was a steal.

a) Option 1 - Install yourself

There are plenty of websites and videos to help you do this. You can take off the rotors and have them machined by a local shop or an auto parts store for $20 to $50 a pair. You could also just buy new rotors.

b) Option 2 - Mechanic Install

If you have a mechanic that you trust, then for relatively little cost this might be a good option for you. Supplying your own parts can save money. You can buy rotors and return them in the event your mechanic was able to machine your rotors.

c) Option 3 - Use one of the other chains or a dealer special

Firestone use the same Wagner Thermoquiet brake pads and perform the install and machining for less than $200. There are often discounts ranging from $35 to $50 available.

I would consider going this route if I could be sure of the competency and honesty level of the particular franchise. One advantage of going this route is that some of these chains really stand behind their work. I know personally that Firestone do. The disadvantage is that they often have the same incentive to upsell you to new calipers and rotors when you don't need them.

When might be a good idea to use Les Schwab?

If you genuinely need new calipers as well as pads and if you need a brake fluid flush then you could get a very good deal out of Les Schwab. Just make sure you don't buy rotors from them and that they machine them for a reasonable price, say up to $50 per pair.

Tuesday, October 25, 2011

Getting a scheduled car service has to be one of the biggest scams going. The price is astronomical compared to the value you get.

You can save hundreds of dollars a year and thousands over the life of your car if you follow the tips below.

Note: Never skip actual maintenance items as per your maintenance schedule. These save you money in the long run. What you are doing is simply not requesting it as an all in one "service".

How to order your regular scheduled car maintenance

The solution is to break out the manufacturer recommended maintenance for your car into the individual tasks and order these individually whether at a dealer or your own mechanic. Do not order anything that says "Check". Order only the operations that end up going beyond just a check.

For example, a typical service will state Change Oil, Rotate Tires, Perform Multi Point Inspection and be charged at $150.

Well an oil change can be had for $20 to $30, a tire rotation for $20 and a multi point inspection can be skipped or is often complimentary at the dealer or elsewhere.

How to get it done for less

Your dealer will most likely have coupons for oil changes and tire rotations. Multi point inspections will often be included with oil changes, will sometimes be free, or available for a small charge.

Independent and chain garages will also offer the same services. They won't necessarily be cheaper as dealers have to compete more and more. The important thing is to go with someone competent, who won't add unnecessary work, and who you can go back to to resolve any problems.

The major chains often do free brake and other inspections in the hope of finding something wrong to fix.

Don't sign up for the work without a second opinion and be prepared to ask for proof.

Some tips for getting good maintenance

Oil changes are cheap but can still be screwed up by the likes of Walmart & Jiffy Lube. Make sure it is done right.

Do not go beyond your maintenance interval and evaluate from your car maintenance schedule whether you come under the severe service interval. If in doubt, change oil early, it is cheap compared to problems.

Run your car for 20 to 30 minutes to get the oil nice and hot before it is drained.

Oil is cheap. Look for rebates. Brands do not matter so much as does compatibility. Refer carefullt to the requirements for your particular vehicle and buy according to that spec.

The main advantage of synthetic will be if you get too busy to change your oil on time. Synthetic is only a little more expensive and on balance worth it given the investment in your car.

Don't buy cheap oil filters. The original filter is your best bet. Buy them directly to give to your mechanic if they try to charge you too much or can't get it.

Learn to change your engine air and cabin air filter yourself as well as the wipers.

Always consider buying the parts yourself and giving to your mechanic. Original parts are best and usually not more expensive.

When original parts are expensive, some research might help you determine what are reasonable or even exact alternatives. A cabin air filter is a good candidate for not worrying about who makes it.

Doing it yourself

For a small investment in ramps and some tools, after a while doing maintenance items yourself will turn into a big money saver that costs you no extra time and gets you a better result. After some practice you'll be able to change oil as quickly as your mechanic without having to spend the time to arrange the appointment and go there. You'll also be in control of the little details that mean you know the job has been done right. The same will become true of other regular maintenance items.

You can even rent tools for free from your local auto parts store, hand in your old fluids, get error codes checked for free, and have some maintenance and repair work done for less.

There is a lot of competition for your motoring servicing dollars so you should never settle for part charges above what you see on Amazon for good brands, nor labor rates that are significantly above the norm.